Correlation Between Park Hotels and Western Acquisition

Can any of the company-specific risk be diversified away by investing in both Park Hotels and Western Acquisition at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Park Hotels and Western Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Park Hotels Resorts and Western Acquisition Ventures, you can compare the effects of market volatilities on Park Hotels and Western Acquisition and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Park Hotels with a short position of Western Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Hotels and Western Acquisition.

Diversification Opportunities for Park Hotels and Western Acquisition

-0.44

Correlation Coefficient

Park Hotels  Western Acquisition

Very good diversification

The 3 months correlation between Park and Western is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Park Hotels Resorts and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Acquisition and Park Hotels is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Park Hotels Resorts are associated (or correlated) with Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of Park Hotels i.e., Park Hotels and Western Acquisition go up and down completely randomly.

Pair Corralation between Park Hotels and Western Acquisition

Allowing for the 90-day total investment horizon Park Hotels Resorts is expected to under-perform the Western Acquisition. In addition to that, Park Hotels is 3.15 times more volatile than Western Acquisition Ventures. It trades about -0.07 of its total potential returns per unit of risk. Western Acquisition Ventures is currently generating about -0.12 per unit of volatility. If you would invest  1,092  in Western Acquisition Ventures on September 28, 2024 and sell it today you would lose (17.00) from holding Western Acquisition Ventures or give up 1.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Park Hotels Resorts  vs.  Western Acquisition Ventures

Park Hotels Resorts

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Park Hotels Resorts are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Park Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Acquisition

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Western Acquisition is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Park Hotels and Western Acquisition

The main advantage of trading using opposite Park Hotels and Western Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Hotels position performs unexpectedly, Western Acquisition can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Acquisition will offset losses from the drop in Western Acquisition's long position.

The idea behind Park Hotels Resorts and Western Acquisition Ventures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.